A New Paper on Energy Poverty

I’m a coauthor on a new paper, “Understanding the Scale of Investment for Universal Energy Access”, just published in Geopolitics of Energy. (The other authors are from UNIDO, the IEA, and Margaree Consultants.) We assess the cost of delivering basic electricity and modern cooking fuels to those who currently lack them (about 1.3 and 3 billion people respectively). After presenting a comprehensive review of other estimates, we derive our own: $12-134 billion for electrification, and $1.4-2.2 billion for clean cooking fuels. To be clear, this isn’t a cost estimate for government spending: it is the total annual cost, including private expenditures. The sources of this money and the policy framework for mobilizing it are separate matters.

The estimate for electrification, aside from the low end, is considerably greater than those that have been presented in the past. Why? Peculiarly, most past estimates have only included the cost of generating equipment, but have ignored the cost of fuel. We include that cost, which is particularly high for rural electrification, which still tends to include a significant (and highly inefficient) oil- or diesel-fired component. The very highest estimate ($134 billion) also reflects higher electricity consumption than other studies normally use; I’d put my bets closer to our midrange estimate, $60 billion, which has more modest expectations for electricity consumption.

Our estimate may actually, however, be low. We note in the piece that we are missing two important quantities: the cost of connecting users to the grid (as opposed to generating the electricity for grid-connected users in the first place), and the cost of buying appliances (electricity isn’t much use without lightbulbs and TVs). We provide some crude estimates for those costs, but don’t include them in our bottom line.

There’s a lot more to be understood if we’re to successfully address the tragic state of energy access facing half of the world. We hope, though, that this paper will help provide a useful framework and foundation for thinking some of the important issues through.

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Thanks for the self-promotion. There is far too little work done on electrification issues. I’m just now reading Nye’s book on electrification in the United States and it strikes me that from the utility perspective in the early 20th century, it was the cost of the distribution network that was the real economic barrier. It wasn’t until the New Deal that the federal government stepped in to make investments in rural distribution so that electricity spread beyond large towns in America. Is the situation different in the developing world today?

Varies by country/region, but generally the answer is, the situation in today’s developing world is worse in that the urban utilities are not as large nor financially stable, making it even more difficult to invest in rural networks; generation shortages are also frequent, large, and long-standing. (Unlike US in the 1930s.)

The Bazalian, et al. paper fudges the question of network costs. “Our estimates, as well as a number of the studies reviewed, do not explicitly include costs related to transmission and distribution (T&D).” They merely state “the IEA (2009b) estimates that T&D costs for gridconnected electricity are roughly equal to the capital costs for generation.” This is gross over-simplification, but so is the rest of the paper.

It is a conceptual war that is being fought here. For example, there is noneed for gas cars and gas powered generators where gas has to be imported and palm oil is rotting on the trees. If you have access to sun, photovoltaics make sense, France uses nuclear because they have infrastructure. What needs to be done is the regionalization of energy, not the importation of fnancially stimulated sources. Liberia has unlimied access to biodiesel, why are they importing petroleum?

Posted by Joe GurowskyNovember 17, 2010 at 5:47 pm

Great report, Mr. Levi et al. As the Senate struggled to confront formulating an updated energy strategy domestically, it is still important to realize the scope of energy poverty abroad. There is no question we have much work to do at home, but it is important that more people realize that more than 2.5 billion people do not have access to modern forms of energy and 1.3 billion people lack access to electricity as you detailed. As time ticks away to 2015 and the targeted date for the MDGs to be meet, energy poverty acts as a anchor further complicating reaching the admirable goals to eradicate poverty. Alleviating energy poverty can serve as a stimulus to move on a path of more robust economic growth and in turn human development.

After driving at night from Accra, Ghana to the Western region of the country, I was only able make out the villages that were completely dark when there was a fire burning along the worn roads. Clearly, little productive activity can occur in such situations. As you mentioned Michael, electrification is part of the path towards economic growth. To effort towards that simple sounding statement, many of these areas are the perfect locations for distributed on-site solar pv – eliminating the need for constructing an impractical large, polluting, centralized plant and new long, costly transmission infrastructure. Yes, there are international and various other level efforts to start to confront energy poverty with renewable energy, but when the scope is measured in billions of people and billions of dollars, the efforts are currently too small.

Joe G.

Posted by NikhilNovember 26, 2010 at 6:47 pm

Worked through the paper and its numbers, sources. I think there are two core mis-judgments in your assumptions: (i) average consumption in kWh/capita/year terms of 100-456 for urban areas and 50-360 for rural areas; and (ii)(in mid and low scenarios) that 50% of the market can be grid connected, and another 40% by rural mini-grids plus off-grid by 10%.

With a household size of 6, you are talking about as much as 150-200 kWh/mo/household.

The “minimum basic” household electricity requirements are quite meagre in this emerging world of LED lighting and electronic ICTs (mobile phone, which can also have a radio and other uses). The very poorest can switch from their 2-3 kerosene lamps (say, one hurricane lantern and 1-2 can lamps)to 2-3 LED lights (of varying output, not as bright as a 5-7 W CFL)and phone charging for as little as 3 kWhs a month. (Ahs are a better measure, not kWhs). Not-so-poor households can stil do with batteries for lighting (more and brighter, including outdoor lights) plus TV for 10 kWhs a month.

Those on the grid can use, say, 3-4 CFLs of 7-12 W each average of five hours a night, plus radio, small TV for 15 kWhs a month. After that, there are some appliances that take high power and don’t require that high an investment in appliance – e.g., iron, small kettle, even a rod water-heater, a heat plate – whose use can sharply increase electricity use. But this generally doesn’t happen and can easily threaten the economics of grid extension of small grids. Anything beyond that requires investments in the end-use appliances and building shell which are beyond the reach of most poor.

I know you allow for “basic productive” uses (in or outside households)but for most of the currently unelectrified – or even recently electrified (last 20 years) – average monthly consumption (billings) of 10 kWh/capita/month for grid customers in rural areas is a stretch. The 50 kWh/capita/month is extremely rare – perhaps in South Africa, after a decade or so of connection and also because the tariffs are so low (and heating requirement is high).

Your too high consumption assumptions – actual data are difficult to get unless relevant utilities in Africa and Asia make a special effort to run their data sets – then combined with the assumption of grid rollout (urban or micro rural) create, in my view, a totally unrealistic scenario. Rural micro-grids (typically 50-200 kW generation) are notoriously difficult to operate and manage; not only do most utilities hate them (if there have any), rarely do private companies want to get into them.

We have seen grid use to grow and keep growing. But that scenario would take decades in the developing world rural areas. “minimum basic” electricity (with solar small-battery-charging, not the conventional car batteries) on the other hand can be rolled out in five years for roughly 2/3rds of the currently unelectrified households in those areas. The other 1/3 would take longer.

And of course solar small-battery-charging is also an immediate answer to roughly 1 billion people on the grid who suffer frequent and/or long outages (esp. India, Pakistan, Bangladesh, Afghanistan these days).

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